Economists notoriously fail to explain the world in which we live. And their forecasting capabilities are highly unreliable. Why is that? Our take is that there is a fundamental impossibility for economists to apprehend the real world’s complexity. And so, it is going to get even worse as the world complexity increases!
Economists try to fit the economy in simple rules. They do that at different scales: macro-economy; micro-economy; case studies. One of the major hypothesis is that of the rational individual, i.e. that individual’s decision making is driven by rational decisions based on improving one’s economical condition.
We know for a long time that it is a simplified view of people’s actual motivation. It has become clearer in the last few decades with the emergence of the concept of “leadership” (why would you want “leadership” in the economists’ world when compensation should be enough?). Repeated crisis have shown the limits of all rational econometric models – and that “Black Swan” events happen frequently – events that upend conventional thinking based on careful analysis of past statistical data.
What are economists good for then? Simply giving some comfort to politicians? Driving the economy in times of normality?
Economics is still a recent discipline. If it is to become really useful it needs to apprehend complexity – how complex systems work, how they can become unstable and unpredictable. And then only will economics be truly be able to take the central role in governance that it seeks for a long time.
